Hi ,
This year, people in high-income economies will inherit about $6 trillion altogether, equal to about 10% of GDP. Like inequality overall, inheritance as a proportion of the economy fell dramatically from highs in 1900 to a low point around the mid 1970s when, mysteriously, they began rising again – making them twice as important as they were in the 1980s for people in the UK, while in Germany their share of the national economy has nearly tripled since the 1970s.
Here in the UK, the endless housing crisis has focused inheritance onto questions of home-ownership. The average deposit paid by first-time buyers is now £53,414, rising to £144,500 in London. That's well out of the reach of anyone earning normal wages; especially if they're also paying rents that have risen faster than real wages every year since 2007.
The result is that owning property in London – especially if it was bought in earlier decades – is solidifying a new, unequal class of people who can rely on family property to start their careers or can expect an inheritance of nearly half a million. However, the problem is rapidly spreading far beyond London. Just last month, Common Wealth published the Greater Manchester Gentrification Index, which showed that Manchester's skyscraper building boom has come alongside jumps in prices and 6 in 10 residents of the most gentrified wards leaving. The model of high-end development, house price rises, and inheritance is a profitable and spreading one. As a result, the worth of the UK's buildings has risen from 130% of GDP in the 1990s to 270% now, well in excess of any productive part of the economy.
However, while the UK's housing crisis dictates the shape of our inheritances, the massive rise in inheritance is a worldwide problem and particularly notable in the rise of inheritance billionaires. All billionaires under 30 inherited their wealth and wealth accumulation has skyrocketed.
The rise in inheritance volume hasn't been matched, however, by a rise in inheritance tax receipts. Inheritance now makes up nearly 9% of UK GDP; the last time the share was that high was in the 1950s, when inheritance taxes made up around 3% of overall tax receipts. Today, inheritance tax is only 0.3% of national income.
The inequality this creates is a problem for all of us. The rise of inherited wealth creates a lot of incentives for the beneficiaries of this system to prevent our crises being solved – and we already know that our political systems are much more responsive to those with wealth. Which is presumably why inheritance taxes have disappeared in much of the global north.
We need to urgently introduce wealth taxes and start tackling toxic wealth acculumation. If we don't, the society inherited by the next generation will be a deeply broken one. |
